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In recent months, home prices have been falling in most housing markets because of affordability pressure. Rising mortgage rates have pushed new monthly payments well over borrowers' ability to pay them off. In addition, some borrowers have lost their mortgage eligibility because they are now required to maintain a certain debt-to-income ratio. Buy from Del Aria Investments & Holdings, a real estate research firm, tracks 150 major housing markets. Of those, 89 have seen home values fall from their 2022 peaks. And in ten of these markets, the Zillow Home Value Index has declined more than 5%.
Moody's Analytics
The decline is expected to happen across 210 metro areas in the U.S., with some markets having even more drastic drops. In fact, many metro areas in the West are expected to have a greater drop than the average. Some metro areas are likely to see a 20% fall in prices from their peaks, such as Phoenix and Orlando. The declines could happen even without a recession. However, if the Federal Reserve slows the economy enough to cause a recession, that decline will be even more dramatic.
This downward trend is consistent with previous predictions from housing analysts and economists. In August, Moody's Analytics predicted that the price of existing homes in the U.S. would decline by between 5% and 10%. In September, Moody's revised its forecast downward to 10%. And in October, it predicted that "significantly overvalued" housing markets would drop by more than 25%.
Pinto
A recent report by Moody's Analytics looks at the future of home prices in 414 U.S. markets. The company expects prices to fall in 210 of these markets and rise in the remaining 204. The study also found that 183 of the 413 largest housing markets are overvalued. Some are overvalued by as much as 71%, and the priciest houses are mainly located in the west.
The current momentum in the housing market hasn't slowed down yet. Employment is still strong, and demand for homes remains above supply. However, rising interest rates are likely to dampen demand and make borrowing more expensive. The Bank of England has made it clear that it will not delay raising interest rates, and this may mean a slowdown in the housing market.
Fannie Mae
In a recent report, Fannie Mae lowered its forecast for home sales in 2022. The reason for the downgrade was the rapid rise in mortgage rates and outsized increases in home prices. The new estimate for 2022 home sales is 16.2% lower than the previous estimate. However, this does not necessarily mean that home prices will fall.
The housing market continues to face significant challenges. Rising mortgage rates are a significant shock to the market. However, experts predict that home prices will rise by 10.8% in 2022. This is still double the growth rate since 1987.
Zillow
A recent report by the American Enterprise Institute's Housing Center shows that house prices in the U.S. are at a pivotal point. The market has turned from a spring of record appreciation to real estate declines in some metros, and is tracking to see the first substantial six-month pullback in over a decade.
The report says house prices will continue to rise, but the pace will slow down. This means homebuyers will have to bring their A-game to find a good home. Especially because inventory will likely remain low. In addition, they may have to give up some of their desired features.
Fitch Ratings
Rising house prices are expected to continue into the future, fueled by a combination of high demand, rising construction costs, and persistent shortages of housing. However, rising mortgage finance costs are expected to temper the gains. In 2022, house prices are projected to increase by 5 to 7 percent, slowing down slightly in 2023. This pace of increase is below the 15 percent increase forecast for 2021, which is expected to be the peak year for price gains. Rising interest rates and taxes for speculators are also expected to slow the pace of price gains, although Fitch does not expect this to happen for the next five years.
A downgrade case from Fitch Ratings assumes that housing activity will decline by 2023 and 2024. This implies that revenue and EBITDA margins will contract by about 600 basis points in these years. The case also assumes that homebuilder deliveries will decline by at least 20% in 2022 and 10 percent in 2024. Fitch also assumes that average sell house will decline by mid-to-high percentages every year, and that a collapse in house prices in 2023 will result in a substantial impairment of land and a forfeiture of up to 20% to 30% of the 2022 inventory.
Halifax's house price index
Halifax's house price index will fall by 1.3% in 2022, a year after it hit an all-time high last month. The Halifax HPI is a monthly gauge measuring the changes in the standardized house price to buy a house. The index is affected by several factors, including economic growth, unemployment, mortgage availability, and interest rates. There's also the question of whether Halifax is experiencing a housing shortage, which will push up prices, or excess housing, which will drive down prices.
Halifax's House Price Index is based on data gathered from Lloyds Banking Group. This data allows the index to track changes in the price of property across the UK. It shows that Halifax's average property costs PS294,260, and the country's average house price has reached the highest point in six years. But Halifax's House Price Index growth rate dropped from 11.5% in July to 11.5% in August, which reflects the concerns of the wider housing industry. The cost-of-living crisis and high energy costs are also contributing to this slump.
